Our market development work is important to achieving our statutory objective to promote competition in, reliable supply by and the efficient operation of the electricity industry for the long-term benefit of consumers.

If an anomalous event or outcome occurs in the market or the broader electricity sector, we investigate it to determine the causes and whether something can or should be done to prevent such an event or outcome from occurring again.

We have received two enquires and sent a request for further information relating to the problem definition working paper.

Email from Genesis Energy 15th October 2014

In our review we have come up against the question of what is lobbying and why is it a problem? What we don’t understand is how the Authority distinguishes between “negative” lobbying and “positive” lobbying.

The Authority’s response, 15th October 2014

The distinction is between lobbying for regime change, which relates to the durability of the TPM, and lobbying for or against a transmission investment, where the issue is whether the charges provide the incentives on parties to reveal to the regulator the value they would receive from an investment. We see the former as problematic since the lobbying involves costs that would be avoided if the TPM were durable while the latter may improve efficiency if it results in more efficient transmission investments, which in turn will help promote efficient investment in generation and load.

Email from Castalia, on behalf of Genesis Energy, 14th October 2014

What cost concept is being shown by the blue line in Figures 1 and 2?

In paragraph 11.123, for the vSPD modelling of the impacts of the HAMI charge, is it reasonable to assume that the frequency keeping constraint would be relaxed once new capacity is introduced? And has the Authority considered how much difference it would make to the inefficiency from out-of-merit dispatch to not relax the frequency keeping constraint?

The Authority’s response, 14th October 2014

This chart is intended to be high level, included to deliver a simple point – that under the current TPM, some customers pay more than the cost of meeting their demand while others pay less. For example, given the way the RCPD charge is calculated, South Island load currently pays a portion of the North Auckland and Northland (NAaN) grid upgrade, whereas this is not a cost associated with meeting South Island demand. Given the price refers to an annual price, the corresponding cost refers to an annual cost, and would include things such as return on capital for the assets required to meet a customer’s demand for transmission services, and operating expenses required to meet that customer’s demand for transmission services.

The removal of frequency keeping constraints is just a simplification for modelling purposes. It should not be interpreted to mean that frequency keeping constraints would actually be relaxed if new generation was made available. Rather, frequency keeping constraints would continue to be in effect, but the RHS of the constraint would reflect the new, higher, level of generation output.

Letter to Meridian Energy requesting further information, 14 July 2014

The Authority contacted Meridian Energy requesting further information on the impact of HVDC charges. The letter and Meridian’s response can be found below.